The proposed project is a phase 3 treatment development study to conduct a preliminary evaluation of the effectiveness of the Social Cognition and Interaction (SCIT) program. SCIT is a group treatment that is provided in 50-minute weekly sessions over six months. Fifty six individuals with schizophrenia or schizoaffective disorder will be randomly assigned to one of two conditions: 1) SCIT (n=28), or 2) Treatment as usual (TAU) (n=28). All individuals will continue to receive usual medical care for their disorder including antipsychotic medication. Participants must meet DSM IV criteria for schizophrenia or schizoaffective disorder, not meet current criteria for substance dependence, and have difficulty interacting with others. In addition, participants must be between the ages of 25-60, male or female, any ethnic background, and have an IQ greater than 70. Participants will be assessed at baseline, post-treatment (6 months), and 6 months after completing treatment on a small number of well-defined outcomes (due to the small size of the pilot RCT), including social cognition, social functioning, quality of life, and symptoms. Fidelity of clinicians to the treatment manual will be assessed by weekly supervision, audiotaping the therapy sessions, and utilization of fidelity scales. Data on paranoia and neurocognition, potential moderating variables, will be collected at baseline. Stakeholder (client and therapist) feedback will be obtained at post-treatment only, so as to inform possible revisions to the treatment manual.